I don’t have any personal experience to share when it comes to unreliable boyfriends; one or two examples from my life of unreliable girlfriends (present model excluded) but nothing to compare with recent comments from MP Pat McFadden about the Bank of England.
The Treasury Committee member recently told MPs that the Bank of England has acted like an “unreliable boyfriend” in hints over a possible rise in interest rates.
He accused the Bank of a lack of clarity about the possible timing of rate rises, which resulted in consumers and businesses “left not really knowing where they stand” over interest rates.
Uncertainly over the timing and degree of future rate rises is certainly causing some confusion at the moment when it comes to Financial Planning.
Interest rates are an important assumption to consider when building Financial Plans; over five years of rates at a historic low has resulted in many investors being lulled into a false sense of security about how low interest rates might be in the future.
Of course the Bank of England is unlikely to hike up interest rates if this is likely to result in the fragile UK economy stalling.
Star fund manager Neil Woodford has said this morning that a rate rise of as little as 0.25% could have a big impact on the disposable income of heavily indebted UK consumers, damaging economic recovery.
As a result, he expects interest rate rises to come later than currently expected by the markets, a view we share here at Informed Choice.
It is inevitable though that interest rates will rise in the future; it is the timing and scale of this rate rise that remains uncertain, despite various hints from the Bank of England.
What everyone should do right now is consider what impact a rate rise of 0.25% or 4% would have on their personal finances.
Would debt remain affordable? How would your overall expenditure need to change? Are your savings best positioned to benefit from a rate rise?
